Series 63 Regulation of persons Chapter 1: Broker-Dealers
Under the Uniform Securities Act, an agent registered in one state may transact business in another state in which he is not registered with which of the following? An existing client visiting the state for a 2-week period An existing client who moved to the state 6 months ago An existing client who moved to the state less than 30 days prior An acquaintance from another state who requests that the agent execute transactions on his behalf A) I and III B) II and III C) I and IV D) II and IV
A) I and III An agent may conduct business in a state in which he is not registered if an existing client is visiting in that state or if the client has moved to the state within the past 30 days. Reference: 1.2.1.1 in the License Exam Manual
According to the USA, under what circumstances is an employee of a licensed broker-dealer in a state allowed to sell exempt securities as an unregistered agent? A) Under no circumstances is an employee of a licensed broker-dealer in a state allowed to sell exempt securities as an unregistered agent. B) The employee is not paid any commission or salary. C) The transaction is exempt. D) The securities are federal covered securities.
A) Under no circumstances is an employee of a licensed broker-dealer in a state allowed to sell exempt securities as an unregistered agent. It is unlawful for a person to transact business on behalf of a broker-dealer unless that person is registered as an agent in the state. Only individuals selling on behalf of the issuer may qualify to be exempt from registration as an agent. Reference: 1.2.2.3 in the License Exam Manual
Powers granted to the Administrator under the Uniform Securities Act include the ability to inspect the records of a broker-dealer A) at any time B) only when the Administrator can point to a specific rule, order or section of the Act that he believes has been violated C) after giving appropriate written notice D) when desired, but, not more frequently than quarterly
A) at any time If a broker-dealer is doing business in the Administrator's state, the Administrator has the authority to inspect that BD's records at any time (during normal business hours) regardless of the state in which the records are located. Don't confuse this with an issuer reporting not more frequently than quarterly. Reference: 1.2.3 in the License Exam Manual
Which of the following is required to register as a broker-dealer? A) A savings and loan association B) A bank C) A person who is in the business of effecting securities transactions for the accounts of others D) A trust company
C) A person who is in the business of effecting securities transactions for the accounts of others A person buying and selling securities for customers' accounts is deemed a broker-dealer under the Uniform Securities Act and must be registered as such. Specifically excluded from the definition of a broker-dealer are banks, trust companies, and savings and loan associations. Reference: 1.2.1 in the License Exam Manual
Records that must be kept by a broker-dealer include all of the following EXCEPT A) customer ledgers B) cash receipts journal C) customer tax returns D) a blotter
C) customer tax returns It is not required that any securities professional maintain copies of customer's tax returns. Reference: 1.2.3 in the License Exam Manual
Under the Uniform Securities Act, registrations of securities professionals expire A) three years from their effective date, unless renewed B) two years from their effective date, unless renewed C) every December 31, unless renewed D) one year from their effective date, unless renewed
C) every December 31, unless renewed Note that the question asks for the expiration date under the Uniform Securities Act, which is December 31. Do not be confused by actual practice, which may vary in some states. Reference: 1.2.2.3 in the License Exam Manual
If an agent representing a broker-dealer located in Utah wishes to solicit business in California, under the Uniform Securities Act, the agent would A) be allowed to solicit if the securities are exempt B) not have to register if the broker-dealer is registered in California C) have to register in California D) not have to register in California
C) have to register in California Typically, an agent, when representing the broker-dealer to solicit securities transactions, must register in every state where business is conducted, even if the securities or the transactions are exempt. Reference: 1.2.2.3 in the License Exam Manual
If a state-registered investment adviser moves to another location, the Administrator must be notified A) within 30 days B) within 7 days C) promptly D) within 15 days
C) promptly An address change must be communicated promptly to the Administrator. Reference: 1.2.3 in the License Exam Manual
According to the USA, a person must register as a broker-dealer in a state if he had which of the following? No place of business in the state, but clients who relocated their official residence to that state more than 30 days ago No place of business in the state but dealt exclusively with broker-dealers in that state No place of business in the state but effected transactions exclusively with issuers of securities in that state A place of business in the state A) I, II, and IV B) I and IV C) II and III D) I, II, III, and IV
B) I and IV The term "broker-dealer" excludes a person who has no place of business in the state, who effects transactions exclusively through issuers, other broker-dealers or institutions, or who directs an offer in the state to an existing customer. When clients move from one state to another, the broker-dealer may continue to do business with that client without registering in that state for up to 30 days. Once the client has been a new resident for more than 30 days, the broker-dealer (and any agents handling that account) must register in that state or cease doing business with that customer. Reference: 1.2.1.1 in the License Exam Manual
If a broker-dealer whose principal office is in Iowa addresses 5 solicitations to potential customers in the nearby Nebraska town of Middleton, and the return address on the mailings is that of the broker-dealer's satellite office in Middleton, which of the following statements is TRUE? A) If the broker-dealer is registered with the SEC, it is not required to register in any state. B) The broker-dealer must register in Iowa and Nebraska. C) The broker-dealer must register in Iowa only. D) The broker-dealer must register in Nebraska only.
B) The broker-dealer must register in Iowa and Nebraska. Under the USA, a broker-dealer must register in any state in which it has an office or conducts business with noninstitutional (retail) clients. Soliciting by mail constitutes making an offer in the state. Remember, there is no de minimis rule for broker-dealers. Unlike investment advisers who register with the state or the SEC, never both, SEC registered broker-dealers also must meet state registration requirements. Reference: 1.2.2 in the License Exam Manual
A broker-dealer having no place of business in a state is not required to be registered in that state if the broker-dealer A) is licensed/registered in its state of residence B) does no business in that state other than with institutional clients C) is a member of the New York Stock Exchange D) is a member of FINRA
B) does no business in that state other than with institutional clients A broker-dealer must be registered in every state it sells or offers to sell securities, unless an exemption is available. If a broker-dealer has no office in a particular state and no business is done in that state other than with institutional clients, registration there is not required. Reference: 1.2.1.1 in the License Exam Manual
Which of the following is required to have a Series 63 license? A) A broker-dealer B) An issuer C) An agent representing a broker-dealer when offering securities to the public D) An individual who is a silent partner of a broker-dealer
C) An agent representing a broker-dealer when offering securities to the public Passing the Series 63 exam (Uniform Securities State Law) is required before an agent may sell securities to the public as a representative of a broker-dealer. Reference: 1.2.2.2 in the License Exam Manual
Mr. Thompson is a registered agent with First Securities Corporation, a broker-dealer registered in, among other states, Illinois and Ohio. Ms. Gordon is one of Mr. Thompson's best clients and she will be spending the months of January and February in Palm Springs, California, rather than Chicago. She asks if there is a First Securities Corporation office nearby that she can visit to watch the Ticker Tape and is informed that the firm has no offices in California. During her stay, Mr. Thompson calls Ms. Gordon on a number of occasions with stock recommendations, some of which result in sales. Which of the following statements regarding the licensing and registration requirements of the Uniform Securities Act are TRUE? Mr. Thompson is violating the USA if he is not registered in California. Mr. Thompson is not violating the USA if he is not registered in California. First Securities Corporation is violating the USA if it is not registered in California. First Securities Corporation is not violating the USA if it is not registered in California. A) I and IV B) I and III C) II and IV D) II and III
C) II and IV The USA only requires that an agent be licensed in the state of residence of the client. The act recognizes that people travel and, as long as there is no change of legal residence, registration in California would not be required. The definition of broker-dealer excludes an entity without an office in the state that does no business with residents who are members of the public. Because Ms. Gordon is not a California resident, the firm is not required to be registered in that state. Reference: 1.2.1.1 in the License Exam Manual
Which of the following statements is NOT true regarding the authority of the Administrator under the Uniform Securities Act? A) The Administrator may require financial reports from broker-dealers. B) The Administrator may require a broker-dealer to have a minimum net capital as a condition of registration. C) The Administrator may not examine the records of a broker-dealer without seeking a court order from a federal court. D) The Administrator may require examinations for investment advisers.
C) The Administrator may not examine the records of a broker-dealer without seeking a court order from a federal court. The Administrator has inspection power to view all records within or outside the state as is appropriate or necessary in the public interest, without seeking court approval Administrators may require minimum capitalization as a condition of registration. The Uniform Securities Act states that the Administrator may, by rule, provide for an examination, which may be written or oral or both, to be taken by any class of or all applicants. As a practical matter, an oral examination would apply to the business entity (broker-dealer or investment adviser) while written examinations are taken by agents and investment adviser representatives. The Administrator is also given the authority by the act to require the filing of financial reports regarding the net worth of the firm. Reference: 1.2.3 in the License Exam Manual
Which of the following statements regarding the Administrator's authority to examine the books and records of registrants is TRUE? A) If a broker-dealer's or investment adviser's records are located outside the Administrator's state, they only may be examined to collect evidence for a hearing. B) Such examinations are not necessary or appropriate for the protection of investors or in the public interest. C) The records may be examined at any time for any reason within or outside the state if it is in the public interest to do so. D) Broker-dealer records may be examined at any time, but the same is not so in the case of investment advisers.
C) The records may be examined at any time for any reason within or outside the state if it is in the public interest to do so. All required records must be made available for examination by a state Administrator, within or outside the state, as is appropriate or necessary in the public interest. Reference: 1.2.3 in the License Exam Manual
A broker-dealer with no place of business in the state would not be required to register with the Administrator unless one of its clients was A) a savings institution B) a unit investment trust registered under the Investment Company Act of 1940 C) an employee benefit plan with assets of less than $1 million D) another broker-dealer
C) an employee benefit plan with assets of less than $1 million As defined in the Uniform Securities Act, "Broker-dealer" does not include a person who has no place of business in this state if he effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, other broker-dealers, or banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, employee benefit plans with assets of at least $1 million, or other financial institutions or institutional buyers. Reference: 1.2.1.1 in the License Exam Manual
The Uniform Securities Act gives the Administrator the power to examine a broker-dealer's business records A) only after providing one week's advance notice or, if necessary for the protection of investors, after obtaining a court order to make an unannounced examination B) only after obtaining a court order C) at any time, even across state lines D) only after providing one week's advance notice to the broker-dealer
C) at any time, even across state lines There are no limitations on the Administrator's authority to examine a broker-dealer's records other than that the examination be held during normal business hours. Reference: 1.2.3 in the License Exam Manual
A sales agent who is only registered in Nebraska works for a broker-dealer that is registered in all 50 states. A customer who is a resident of North Dakota calls the representative in Nebraska and offers to purchase securities. Under the Uniform Securities Act, the agent should A) accept the order because her broker-dealer is registered in all 50 states B) accept the order because it is unsolicited C) reject the order because she is not registered in North Dakota D) accept the order because she received it in Nebraska
C) reject the order because she is not registered in North Dakota Both the broker-dealer and the agent must be registered in each state where they plan to do business. Although the broker-dealer is properly registered, in order for the agent to accept the order, she must be registered in North Dakota. Even though the order is unsolicited, making this an exempt transaction, agents must still be licensed in the state where the client is a resident. Reference: 1.2.2.3 in the License Exam Manual
Question #6 of 50 Question ID: 684863 USATrade Securities, a FINRA member broker-dealer, is registered in 10 mid-western states. Regarding financial requirements, USATrade must meet those of A) the state with the most stringent financial requirements B) FINRA C) the SEC D) the state in which the principal office of the member is located
C) the SEC In all cases, a broker-dealer member of FINRA is also registered with the SEC. As such, when it comes to financial requirements, bonding, recordkeeping, and so forth, the SEC's requirements always trump those of the states. Reference: 1.2.2 in the License Exam Manual
Under the Uniform Securities Act, if the Administrator does not deny an application for registration and no disciplinary proceeding is underway in regard to it, how many days after filing the application as an investment adviser representative does registration generally become effective? A) 5 days B) 10 days C) 7 days D) 30 days
D) 30 days Registration becomes effective 30 days after the application is filed unless the Administrator begins a proceeding or issues a stop order before that time. The Administrator may specify an earlier date, or if an application must be amended, the Administrator may extend the date to 30 days after the amendment was filed. Reference: 1.2.2 in the License Exam Manual
Which of the following is included in the definition of a broker-dealer under the Uniform Securities Act? A) Agent B) Out-of-state broker-dealer with no office in this state that services only other broker-dealers located in this state C) Issuer of securities D) One who effects securities transactions for his own account or on behalf of others
D) One who effects securities transactions for his own account or on behalf of others Only one who is in the business of effecting transactions for his account or on behalf of others fits the definition of a broker-dealer. All of the other choices are specifically excluded from the definition. Reference: 1.2 in the License Exam Manual
Sharon Smith is an agent for Highwater Securities, a broker-dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act, A) because Sharon has no place of business in State X and the client is an institution, Sharon may accept the order without registering in State X B) because Highwater Securities is registered in all 50 states, Sharon must also be registered in all of them C) because Sharon has no place of business in State X and the order is unsolicited, Sharon may accept the order without registering in State X D) Sharon must be registered in State X in order to accept the order
D) Sharon must be registered in State X in order to accept the order Regardless of whether the security is exempt or the transaction is exempt, one must be licensed in any state which is the domicile of a client placing an order. One does not have to be registered as an agent in every state the BD is, only in those where she expects clients to reside. Reference: 1.2.2.3 in the License Exam Manual
When an application for registration as an agent is filed, the Administrator has the right to inquire about any of the following EXCEPT A) a conviction for a securities-related misdemeanor 6 years ago B) an adjudication by the SEC 5 years ago C) a drug-related felony conviction that occurred 7 years ago D) a drug-related misdemeanor conviction that occurred 8 years ago
D) a drug-related misdemeanor conviction that occurred 8 years ago An agent's application for registration must disclose if the applicant has ever been charged or convicted of any felony or securities-related misdemeanor conviction. Non-securities- related misdemeanors are not reported. If there was ever any adjudication by the SEC or an SRO, it would have to be disclosed, as well. Reference: 1.2.2.1 in the License Exam Manual
Under the Uniform Securities Act, registration would NOT be required of A) individuals employed by broker-dealers who limit their activities to managing the company's sales force B) individuals employed by broker-dealers to make cold calls to solicit new clients C) broker-dealers D) individuals employed by issuers of non-exempt issues who work on the company's assembly line
D) individuals employed by issuers of non-exempt issues who work on the company's assembly line Employees of issuers who have nothing to do with the sale of the issuer's securities, such as working on the assembly line, are not doing anything that requires registration under the act. Broker-dealers, individuals soliciting for new clients for the broker-dealer, and those supervising securities sales activities of the broker-dealer are required to register in the appropriate states. Reference: 1.2 in the License Exam Manual
First Growth Securities, Inc., a member of the Financial Industry Regulatory Authority (FINRA), has its main office in State I and is therefore A) registered by FINRA to sell securities in State I B) automatically registered as a securities agent in State I C) a registered investment adviser licensed to sell securities in State I D) required to register as a broker-dealer in the state of State I
D) required to register as a broker-dealer in the state of State I Securities firms that are members of FINRA are registered with the SEC and must register as broker-dealers in the states in which they maintain a place of business. Under the USA, broker-dealers are firms engaged in the business of effecting security transactions in customer or proprietary accounts. A broker-dealer is not a registered investment adviser, although many broker-dealers own separate legal entities that are investment advisers. FINRA does not license its members to conduct business in the states; the state securities licensing agent is the state securities Administrator. Also, a broker-dealer is not an agent; an agent is a person who is employed by a broker-dealer to conduct securities transactions as a representative of the broker-dealer. Reference: 1.2.2 in the License Exam Manual
As defined in the Uniform Securities Act, which of the following statements is TRUE regarding an agent? A) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. B) If someone meets the definition of an agent, that person is exempt from registration requirements. C) An agent may be an individual or a partnership. D) An agent may be a broker-dealer.
A) An agent represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. The text in Section 401(b) of the Uniform Securities Act reads, "Agent means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities. There are cases where an individual representing an issuer would not be considered an agent, such as if the transaction is exempt, but that doesn't change the definition. Reference: 1.2.2 in the License Exam Manual
Which of the following can be substituted for a surety bond? A) Cash or marketable securities B) Commodities, cash, or securities C) Cash or commodities D) Real estate
A) Cash or marketable securities The Administrator may, by rule or order, require registered broker-dealers, agents, and investment advisers who have custody of (BDs and IAs) or discretionary authority over client funds or securities to post bonds in amounts as the Administrator may prescribe, subject to the limitations of section 15 of the Securities Exchange Act of 1934 (for broker-dealers) and section 222 of the Investment Advisers Act of 1940 (for investment advisers). An appropriate deposit of cash or securities shall be accepted in lieu of any bond required. Reference: 1.2.2.4 in the License Exam Manual
Under the Uniform Securities Act, which of the following statements is TRUE regarding registration of an investment adviser if the application has not been amended? A) Unless specified earlier by the Administrator, the registration becomes effective no later than noon on the 30th day after application. B) Unless specified earlier, registration becomes effective no later than 90 days after the application is filed. C) Unless specified earlier by the Administrator, the registration becomes effective at noon on the 60th day after application. D) Unless specified earlier, registration becomes effective no sooner than 15 days after the application is filed.
A) Unless specified earlier by the Administrator, the registration becomes effective no later than noon on the 30th day after application. While the Administrator may specify an earlier date, absent any denial orders or pending proceedings, registrations become effective at noon on the 30th calendar day after the date of filing. The application is considered to be filed on the date received in the offices of the Administrator, not the date of mailing by the applicant. Reference: 1.2.2.5 in the License Exam Manual
An investor who trades securities for her own account is a(n) A) broker-dealer and must register with the state B) public customer who does not need to register C) broker-dealer who does not need to be registered at the state level D) agent for a broker-dealer and must register in her state of residence
B) public customer who does not need to register Investors who trade solely for their own accounts are public customers who do not need to register. Please note that the USA's definition of broker-dealer requires that the person be engaged in the business of effecting transactions in securities for the account of others or for his own account. Reference: 1.2 in the License Exam Manual
Traditionally, banks have been excluded from the definition of a broker-dealer. However, under recent federal legislation, a bank is included in the definition if it A) conducts personal trust activities B) refers customers to a clearly identified third-party brokerage house not under the control of the bank C) bought and sold securities on behalf of customers in a wholly owned brokerage subsidiary D) conducts securities custodial activities
C) bought and sold securities on behalf of customers in a wholly owned brokerage subsidiary Under financial modernization legislation (known as the Gramm-Leach-Bliley Act), banks can have wholly owned brokerage subsidiaries. In such cases, the bank would be a broker-dealer subject to registration. The bank is not a broker-dealer if it refers securities to unrelated third-party brokerage houses or limits its securities-related activities to trust and custodial activities. Reference: 1.2.1 in the License Exam Manual
An Administrator wishing to set the net capital requirement for a broker-dealer may not require an amount greater than that A) of the state where the broker-dealer is registered with the lowest capital requirement B) under FINRA rules C) required under the Securities Exchange Act of 1934 D) of the state in which the broker-dealer maintains its principal office
C) required under the Securities Exchange Act of 1934 The Administrator may, by rule or order, require a minimum capital for registered broker-dealers, subject to the limitations of section 15 of the Securities Exchange Act of 1934. That means, as long as a broker-dealer meets the SEC's net capital requirements, the state cannot impose higher ones. Reference: 1.2.2 in the License Exam Manual
Each of the following requirements is common to the registration of agents, investment adviser representatives, state-registered investment advisers, and broker-dealers under the Uniform Securities Act EXCEPT A) an incomplete application is cause for denial of registration B) all must file a consent to service of process along with their application C) the registration for all is two years in length D) the Administrator retains jurisdiction over the person for a period of one year after termination of registration
C) the registration for all is two years in length A broker-dealer is an entity in the business of effecting transactions in securities for its own account or for the accounts of others, and pays its sales agents commissions. Under the USA, the broker-dealer must register in the states where business is transacted. Reference: 1.2 in the License Exam Manual
Each of the following statements about postregistration provisions is true EXCEPT A) both broker-dealers and investment advisers must comply with recordkeeping rules B) a correcting amendment must be filed with the Administrator if any information filed becomes inaccurate or incomplete C) the securities Administrator does not have the authority to conduct an on-site examination of an investment adviser registered in his state if the adviser does not have an office in that state D) a registered investment adviser may be required to file advertisements
C) the securities Administrator does not have the authority to conduct an on-site examination of an investment adviser registered in his state if the adviser does not have an office in that state Administrators have the authority to conduct an on-site examination of a registered investment adviser even if there is no place of business maintained in the Administrator's state. Under the Act, Administrators may require the filing of advertising used by broker-dealers and investment advisers, who must also comply with certain recordkeeping requirements and file correcting amendments. Reference: 1.2.3 in the License Exam Manual
Under the Uniform Securities Act, there are certain cases when a person in the business of effecting securities transactions for itself or its clients is not considered to be a broker-dealer in the state. In order for this exception to exist, all of the following conditions must be present EXCEPT the person must not deal with any employee benefit plans with assets of not less than $1 million the person must limit its business activities to other broker-dealers and financial institutions the person must not have a place of business in the state all employees must be licensed as agents with the Administrator in at least one state A) III only B) II and IV C) II and III D) I and IV
D) I and IV It is critical to catch the EXCEPT in this question. We are looking for statements that are not true. If the employee benefit plans they deal with have assets of less than $1 million, the exception does not apply. And, there is nothing in the USA that requires a broker-dealer to register every employee, only those that are involved somehow in the sale of securities. Reference: 1.2.1.1 in the License Exam Manual
Which of the following statements regarding broker-dealer registration under the Uniform Securities Act are TRUE? In the absence of any action by the Administrator, the effective date of a registration is noon of the 45th day. The Administrator may initiate a disciplinary action within two years of a broker-dealer's withdrawal of registration. The Administrator may request that the broker-dealer furnish a statement of assets and liabilities. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments. A) II and III B) I and IV C) I and II D) III and IV
D) III and IV Normally, registration of persons becomes effective at noon of the 30th day following filing. If the Administrator requires the filing of amendments, the clock starts over again with the filing of those amendments. Broker-dealers have financial requirements, and the Administrator has a maximum of one year after termination to initiate any actions. Reference: 1.2.2.5 in the License Exam Manual
Under the Uniform Securities Act, the term "agent" refers to individuals who act on behalf of a broker-dealer or issuer in effecting securities transactions. Which of the following individuals are NOT included in the definition of an agent? A lawyer acting on behalf of an issuer in preparing documents describing the issuance of nonexempt securities A lawyer acting on behalf of a broker-dealer who prepares documents describing the sales or purchase of securities to the general public A partner or officer of a broker-dealer whose only securities activity is the purchase of shares of an issuer for his personal investment account An officer of an issuer who sells shares of the issuer's stock to employees without receiving any special compensation A) I, II, III, and IV B) II, III, and IV C) I and II D) II and III
A) I, II, III, and IV An agent is described in the Uniform Securities Act as an individual, other than a broker-dealer or issuer, who represents a broker-dealer or issuer in effecting transactions in securities. The lawyer is not engaged in effecting securities transactions on behalf of the issuer or broker-dealer. Therefore, the lawyer is not considered an agent subject to regulation by the Uniform Securities Act. A partner (or anyone else) of a securities firm making a personal investment does not make him an agent. An officer of an issuer not receiving any compensation for sales of the issuer's stock to employees is not an agent under the USA. Reference: 1.3.2 in the License Exam Manual
Except as limited by the Securities Exchange Act of 1934, the state securities Administrator may require, by rule or order, that broker-dealers make or maintain which of the following records? Account ledgers Correspondence Papers and memoranda Blotters and books A) I, II, III, and IV B) III and IV C) I, II, and III D) II and III
A) I, II, III, and IV The Administrator may require broker-dealers to keep and maintain account ledgers, correspondence, papers and memoranda, and blotters and books provided the state requirements do not exceed federal requirements under the Securities Exchange Act of 1934. Reference: 1.2.3 in the License Exam Manual
When filing the consent to service of process, which of the following is TRUE? A) It is supplied with the initial registration and remains on file permanently. B) It expires simultaneously with the registration on December 31. C) It must be filed annually on the dates specified by the Administrator. D) It is not required of investment adviser representatives, only investment advisers.
A) It is supplied with the initial registration and remains on file permanently. The consent to service of process is supplied with the initial registration and remains on file permanently. Reference: 1.2.2.2 in the License Exam Manual
Under the Uniform Securities Act, which of the following are NOT excluded from the definition of broker-dealer? A) Persons who effect securities transactions as part of a regular business solely for their own accounts B) Issuers of securities C) Agents D) Banks
A) Persons who effect securities transactions as part of a regular business solely for their own accounts Although broker-dealers generally act on behalf of others as well as themselves, there are cases where firms strictly trade for their own positions, such as over-the-counter market makers. Reference: 1.2.1 in the License Exam Manual
Under the USA, a person who has passed the appropriate NASAA examination but whose license has not yet been issued can participate in A) giving a seminar on the benefits of whole life insurance versus term insurance B) prospecting for new clients by mail C) accepting unsolicited orders D) prospecting for new clients in person
A) giving a seminar on the benefits of whole life insurance versus term insurance A person who has passed the NASAA exam cannot transact securities business until the Administrator notifies the employer that the registration is effective. Insurance, unless variable, is not a security. Reference: 1.2.2.5 in the License Exam Manual
An individual wishing to register as an agent for a broker-dealer would be required to file an application for registration that would include all of the following EXCEPT A) the applicant's fingerprints B) citizenship information C) a consent to service of process D) the appropriate fees
A) the applicant's fingerprints Unlike FINRA rules, the Uniform Securities Act does not require fingerprints for natural person applicants. Reference: 1.2.2 in the License Exam Manual
Under the Uniform Securities Act, which of the following is a broker-dealer? A) Issuer B) Corporation that sells interests in an oil and gas limited partnership to investors with the proceeds going to the issuer C) Agent D) Credit union that sells its own stock
B) Corporation that sells interests in an oil and gas limited partnership to investors with the proceeds going to the issuer A broker-dealer is any person that buys or sells for the accounts of others or for his own account. In this case, an entity structured as a corporation is selling a security in the form of limited partnership units and is therefore a broker-dealer. A broker-dealer is not an issuer or an agent. Reference: 1.2.1 in the License Exam Manual
If an incorporated entity sells nonexempt securities to public customers, receives a commission on the sale of the securities, and pays commissions to the employees who sell them, according to the USA, the corporation is a A) corporation selling only to sophisticated investors B) broker-dealer that must be registered C) broker-dealer engaging in exempt transactions D) corporation selling to an employee pension fund
B) broker-dealer that must be registered A broker-dealer is an entity in the business of effecting transactions in securities for its own account or for the accounts of others, and pays its sales agents commissions. Under the USA, the broker-dealer must register in the states where business is transacted. Reference: 1.2 in the License Exam Manual
Under the National Securities Markets Improvement Act of 1996 (NSMIA), states are prevented from registering securities establishing capital and custody requirements that exceed those provided for in the Securities Exchange Act of 1934 establishing recordkeeping requirements for broker-dealers or investment advisers that exceed those required under federal securities law registering investment advisers A) I and III B) I and IV C) II and III D) III and IV
C) II and III The NSMIA streamlined much of federal and state securities law and specifically prevented dual regulation. As a result, states may not impose capital, custody, and recordkeeping requirements that exceed requirements under federal securities law. States can register securities and investment advisers that are not covered by the registration requirements of federal legislation. Reference: 1.2.2 in the License Exam Manual
Under the Uniform Securities Act, when must a consent to service of process be filed with the Administrator? A) With the original application and renewal B) It need not be filed, unless requested by the Administrator C) With the original application only D) When a case is pending
C) With the original application only Initial applications for registration must be accompanied by a consent to service of process. This document becomes a permanent part of the application and appoints the Administrator to accept subpoenas on behalf of the applicant. Reference: 1.2.2.2 in the License Exam Manual
Under the Uniform Securities Act, the Administrator may require a broker-dealer to post a surety bond of A) $10,000 B) $25,000 C) $50,000 D) An amount not in excess of that set by the SEC
D) An amount not in excess of that set by the SEC The NSMIA states that the Administrator may not require a broker-dealer be bonded in an amount above that set by the SEC. Furthermore, bonds will not be required of broker-dealers that maintain a specified net capital. Reference: 1.2.2 in the License Exam Manual
What document must accompany an initial registration application for those persons required to register under the Uniform Securities Act? A) State photo identification B) Proof of citizenship C) A birth certificate confirming the registrant is over 18 years of age D) Consent to service of process
D) Consent to service of process The USA requires that a consent to service of process accompany an application for registration. Proof of citizenship is unlikely to be requested by a state Administrator because foreign nationals can register. Proof of age is not a requirement. Reference: 1.2.2.2 in the License Exam Manual
According to the Uniform Securities Act, a consent to service of process must accompany which of the following? Agent's registration application Civil complaint against a broker-dealer Broker-dealer's initial registration application Investment adviser's renewal A) II and IV B) II and III C) I and IV D) I and III
D) I and III A broker-dealer, an agent, an investment adviser representative, or a state-registered investment adviser must file a consent to service of process with the Administrator upon filing a registration application. Because this is a permanent document, a consent never accompanies a renewal. The consent to service of process gives the Administrator the right to process legal complaints against the applicant. In some states, a federal covered adviser may also be required to furnish a consent to service of process as part of the notice filing procedure. Reference: 1.2.2.2 in the License Exam Manual
As defined in the Uniform Securities Act, an agent is a(n) individual who represents an issuer of nonexempt securities in nonexempt transactions registered broker-dealer that deals in registered securities individual who sells nonexempt securities as a representative of a registered broker-dealer individual who has no place of business in the state and sells securities to an existing client who is not a resident of the state A) II and IV B) I and IV C) II and III D) I and III
D) I and III Agents generally work for and represent a broker-dealer in conducting securities sales or transactions but are excluded from the definition of an agent if they have no place of business in the state and sell securities to an existing client who is not a resident of the state. Individuals employed by issuers to sell in nonexempt transactions are also included in the definition of" agent" unless the issuer itself is one of a specified group of exempt issuers (see your LEM for the list). Reference: 1.2.2 in the License Exam Manual
All of the following may be required of broker-dealers by the postregistration provisions of the act EXCEPT A) The Administrator may require them to file financial reports B) The Administrator may require the filing of any form letters sent to prospective investors C) The Administrator may require the maintaining of correspondence for a specified period of time D) requiring a broker-dealer to maintain records for a period longer than specified in the Securities Exchange Act of 1934
D) requiring a broker-dealer to maintain records for a period longer than specified in the Securities Exchange Act of 1934 One of the specific provisions of the National Securities Markets Improvement Act of 1996 was that no state had the authority to impose financial or recordkeeping requirements on a broker-dealer that were in excess of those stated in the federal Securities Exchange Act of 1934. Reference: 1.2.2.4 in the License Exam Manual
